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What you need to know about self-directed IRAs and alternative investments

Over the past few decades, the introduction of newer investment strategies has given a continuously growing number of investors access to both conventional stocks and bonds and non-traditional alternative investments. Now, it’s easier than ever for investors to jump into a broad range of asset classes. But, did you know that you can access more of these alternative strategies in a self-directed IRA, with all the tax benefits of a retirement account?

Excess returns and diversification are harder to find

The ease of investing has caused a great deal of overlap on a broad scale because many strategies invest similarly and track the same benchmarks. As a result, U.S. and international stock correlations have inched mostly upward since 1980. With these asset classes moving closely together, both diversification and excess returns have become harder to find. The old 60/40 stock to bond portfolio may be losing its luster, and many investors are looking at alternative asset classes, especially where traditional investments may come up short.


Alternative investment IRAS can give you an edge

While seeking additional returns from alternative asset classes, investors can consider self-directed IRAs –also referred to as alternative IRAs—to supplement their retirement portfolio with additional diversification and return potential. These accounts are eligible to hold tangible, hard assets like real estate or precious metals, plus investments you may not normally have access to, like private equity and even crowdfunding. Yes, that means that a private equity IRA or a crowdfunding IRA investment is possible. So, in addition to an investment in alternatives offering strong diversification and return potential, they may be less influenced by the fluctuations of common investments and indexes and can be included in a tax-deferred alternative investment IRA account.

As a self-directed IRA and alternative IRA custodian, STRATA can hold alternative assets in IRA accounts, allowing you to take better control of your financial future. For example, the right custodian for a real estate IRA can help to shield rental income from current taxes or a private debt IRA could be an efficient way to diversify a retirement portfolio.

Here’s what you need to know about alternative IRA strategies:

1. You can own a wide range of alternative asset classes under a single custodian

You’re likely familiar with holding gold bullion, gold coins or real estate investments in your IRA. But did you know you can hold much more? With the right custodian, a self-directed IRA can give you a wide array of additional alternatives investment options for your IRA, including:

•  Directly-owned real estate IRA (residential or commercial, including raw land)
•  Private equity or private debt instruments
•  Trust deeds or mortgage notes
•  Promissory notes or corporate debt
•  Closely-held stocks
•  Equity or debt crowdfunding
•  Public or private LPs or LLCs
•  Brokerage accounts for publicly-traded stocks, mutual funds or ETFs
•  REITs
•  Other alternative investments

2. Your returns can grow tax-free

Self-directed retirement accounts offer significant tax advantages. Even if you own traditional investments like stocks or mutual funds, Individual Retirement Accounts (IRAs) enable you to grow your wealth without capital gains taxes, or taxes on dividends, by potentially reducing your tax expenses.

Depending on your income and other factors, you can utilize a Traditional, Roth, or even SEP IRA to house your alternative assets. Each retirement account type allows your earnings to grow free of capital gains, but Roth IRAs are treated differently when you make withdrawals (distributions). Learn more about the differences between Roth and Traditional IRAs for alternative investments.

By holding alternative IRAs, investors can combine the return potential of alternative investments and remain insulated from capital gains and income-related taxes. You don’t have this tax advantage in conventional investment accounts. In traditional brokerage accounts, also referred to as a “taxable account”, long-term capital gains taxes can reach 20%, and short-term capital gains are still taxed as ordinary income rates. Dividends can be taxed up to 20% on dividends, depending on your tax bracket. Even if the passing of the new tax bill provides relief, investors must still closely watch the tax consequences of their investments.

3. Not all self-directed IRA custodians are the same

Though self-directed IRAs and alternative IRA strategies have grown in popularity, your custodian still matters. In many ways, the service you receive and the quality of your alternative IRA custodian is as important as the selection of your alternative investments themselves. Your alternative asset custodian must possess the specialized knowledge and competencies that ensure your transactions are executed properly, and account valuations are appropriately and accurately reported on your statements.

Alternative IRA custodians should consistently deliver great service through account updates and responsive customer service—to you and your advisor. STRATA is dedicated to delivering responsive communication and support for each of its alternative investment IRA accounts.

Grounded in Quality

At STRATA, we make alternative IRA investing easy and effective. Our team of alternative IRA investment experts have over 350 years of combined experience to work with you and your financial advisor to custody your assets seamlessly. We are known for delivering prompt, efficient service, and our commitment to integrity continues to set us apart. Though regulation is complex and always changing, our robust regulatory safeguards ensure that our processes remain compliant with IRS tax guidelines.

By harnessing leading, secure and intuitive technology, and maintaining a deep bench of experienced staff, we excel in an area that many of our competitors choose to ignore — customer service. Our values are the cornerstone of our firm’s culture, and drive how we do business.

Learn more about the benefits of self-directed IRAs online at www.StrataTrust.com, or speak to one of our self-directed IRA experts at 866-642-7989.


When alternative IRA custody is this easy, the possibilities are endless.

Founded in 2008, STRATA Trust Company has built a reputation delivering streamlined and straightforward custody. Our service-driven team has helped thousands of investors and investment professionals unlock opportunities in self-directed retirement accounts across a wide range of alternative investments. Formerly known as Self Directed IRA Services, Inc., STRATA has strategically realigned to support a broad range of investment professional partners in growing their IRA asset base – always with an eye on the future.

With offices in Austin and Waco, Texas, STRATA operates as a Texas-chartered trust company with direct oversight by the Texas Department of Banking. Led by a seasoned team with over 350 years of combined experience, 35,000+ investors empowered and over $2 billion in assets under custody, our customers experience a clear difference in our approach to IRA custody.

Tags: alternative investments, IRA investments, private debt, private equity, real estate, retirement, Roth IRA, Traditional IRA, types of IRA